In a game where two firms must decide whether to advertise or not, which scenario best illustrates a Nash equilibrium?

A Nash equilibrium occurs when each firm makes the best decision they can, considering the decision of the other firm. In this game, if both firms choose to advertise, neither can improve their situation by changing their choice alone, because if one stops advertising while the other continues, the one that advertises will gain more customers. For example, imagine Firm A and Firm B both decide to advertise; if Firm A stops while Firm B continues, Firm A will lose customers and profits. Therefore, the situation where both firms advertise is stable, as changing their strategy unilaterally would not benefit either firm. This mutual decision illustrates the Nash equilibrium, where both firms are doing the best they can given the other's choice.